Fraud guardian uses 'unfair business practices', Judge rules

LifeLock encroaches on Experian operation

Fraud-prevention service LifeLock engages in unfair business practices because it violates parts of a federal law governing the safeguarding of consumer credit reports, a federal judge has ruled.

The finding, by US District Judge Andrew J. Guilford of California's central district, came in a case brought by Experian, one of the top three credit reporting services in the US. The lawsuit claims LifeLock costs Experian millions of dollars every year by bombarding it with calls on behalf of customers who have signed up for a $10 per-month service.

The calls demand Experian place what's known as an initial fraud alert in the customer's file as required under the FCRA, or Fair Credit Reporting Act. LifeLock renews the request each time the alert expires, which is 90 days after it was last put in place.

Experian has long argued that provisions of the FCRA bar LifeLock from making such calls on behalf of customers and that to claim otherwise is misleading. Instead, such calls can only be made by a personal representative of the consumer. Last week, Guilford, who is hearing the case, agreed.

"Under the clear terms of the legislative history, any request for a fraud alert 'must' be made by 'an individual,' and not by a company like Lifelock," the judge wrote. "Experian clearly incurs costs each time it must process a fraud alert made by Lifelock. These costs include the costs of allocating Experian's electronic resources and employee time, plus the maintenance costs of Experian's toll-free telephone number and webpage used to accept fraud alert requests."

It's worth noting that Experian offers fraud-prevention services of its own that directly compete with those of LifeLock. That arrangement is especially unpleasant when you consider that it's in large part due to the laxness of Experian and the other credit reporting services that consumers are threatened in the first place. Rather than giving us more control over how and when our detailed portfolios are turned over, Experian offers a paid service to effect pretty much the same thing.

Not that plenty of other companies don't offer similar fee-based services.

LifeLock chief executive Todd Davis downplayed the effect of the ruling, saying it didn't affect reports his company made to other credit reporting services. Those services, in turn, are required to share alerts with their competitors, so it's a fair bet LifeLock-filed alerts would end up on Experian's files anyway, he told MSNBC. ®